Complainant, having made investments in benami land deals, could not have instituted civil proceedings for recovery against persons in whose name the properties were held: Apex Court quashes proceedings against accused in alleged benami land deal
Justices B.R. Gavai & Sandeep Mehta [15-05-2024]

Read Order: C. SUBBIAH @ KADAMBUR JAYARAJ AND OTHERS v. THE SUPERINTENDENT OF POLICE AND OTHERS [ SC- CRIMINAL APPEAL NO(S). 2582 OF 2024]

Tulip Kanth 

New Delhi, May 17, 2024: In a criminal proceeding involving benami land deals instituted at the instance of a Government teacher, the Supreme Court has set aside a Madras High Court order dismissing the application preferred by the appellants seeking quashing of proceedings under Sections 420, 120B,294(b), 506(ii) of the IPC. The Top Court opined that a dispute which is purely civil in nature has been given a colour of criminal prosecution alleging fraud and criminal breach of trust by misusing the tool of criminal law.

The complainant, before being appointed as a Government teacher, was doing real estate business for earning his livelihood for the past 16 years.He claimed that taking undue advantage of the trusting nature of the complainant, the accused persons induced him to join their real estate business claiming that they had strong political connections. The complainant was not allowed to get the purchased properties registered in his name despite making the investments. He was given assurances that the plots bought under the names of different persons would be sold for huge profit in a very short duration and he would be given his share.

The complainant invested a sum of Rs. 1,01,47,800/- towards this transaction whereas, the accused invested proportionately much lesser amounts in the said land deal. A-1, A-3, A-4, and A-6 along with the complainant, purchased the said parcel of land from A. Sairam for a total consideration of Rs. 3,08,33,600/-. However, as per the complainant, the accused never gave him the plots equivalent to the investment made by him and thereby, committed fraud and breach of trust.

When the complainant was not given his share of properties, a Panchayat meeting was held whereby it was agreed that 52 plots admeasuring 256.51 cents would be handed over by A-1 and A-2 to the complainant towards the investment made by him.However, the accused committed breach of trust By not giving the complainant his share. The sale deeds were also not executed in favour of persons who were nominated by the complainant. It was further alleged that A-1 further induced the complainant to pay a sum of Rs. 41,00,000 in 2011 hereafter, the sale deed for one of the properties forming a part of the settlement memorandum was executed. The accused hadalso fraudulently transferred some lands in favour of unknown investors. Being aggrieved of these continued criminal activities of the accused, the complainant submitted a complaint at the Kovilpatti West Police Station.

The appeal by special leave before the Top Court was filed challenging the judgment of the Single Judge of the Madras High Court dismissing the application preferred by the appellants herein seeking quashing of proceedings of pending in the Court of Judicial Magistrate for offences punishable under Sections 420 read with Section 120B, Section 294(b), Section 506(ii) read with Section 114 of the Indian Penal Code, 1860( IPC).

Considering the fact that the complainant is a Public servant, the Division Bench of Justice B.R. Gavai & Justice Sandeep Mehta had put up a query to the Counsel regarding the applicability of Section 13(1)(b) and Section 13(2) of the Prevention of Corruption Act, 1988. It was submitted that 

whatever money the complainant invested in the disputed land deals entered into with the accused, were genuine investments made by using his valid and declared sources of income and savings. Being satisfied with the explanation, the Bench didnot find any justifiable cause so as to direct an enquiry against the complainant for the offences under the PC Act.

It was noticed that the property deals allegedly made in the names of other persons by using the funds partially provided by the complainant were benami transactions. Referring to the Benami Transactions (Prohibition), Act 1988, the Bench opined that by virtue of the provisions contained in Sections 4(1) and 4(2) of the Benami Act, the complainant is prohibited from suing the accused for a civil wrong, in relation to these benami transactions, as a corollary, allowing criminal prosecution of the accused in relation to the self-same cause of action would be impermissible in law.

“It is, thus, clear that the complainant in spite of having made investments in the land deals which were evidently benami transactions, could not have instituted any civil proceedings for recovery against the person(s) in whose name, the properties were held which would be the accused appellants herein”, the Bench said.

The Bench deciphered from the complaint that there was no such allegation therein which could persuade the Court to hold that the intention of the accused appellants was to defraud the complainant right from the inception of the transactions. 

Noting that the allegations can give a cause to the complainant to sue the accused appellants in a civil Court but such remedy is barred by Section 4 of the Benami Act, the Bench said, “Thus, we are of the firm view that the necessary ingredients of the offences punishable under Section 406 and Section 420 IPC are not made out against the accused appellants from the admitted allegations set out in the complaint and the charge sheet. It cannot be doubted that a dispute which is purely civil in nature has been given a colour of criminal prosecution alleging fraud and criminal breach of trust by misusing the tool of criminal law.”

It was observed that in view of the clear bar contained in Section 4 of the Benami Act, the complainant could not have sued the accused appellants for the same set of facts and allegations which are made the foundation of the criminal proceedings.

Moreover, apart from a bald allegation made by the complainant that A-1 abused him and intimidated him on July 28, 2010, there was no material to show that the accused indulged in criminal intimidation of the complainant so as to justify invocation of the offence punishable under Section 506(ii) IPC.

“Thus, we are persuaded to accept the contention of learned counsel for the accused appellants to hold that the criminal prosecution instituted against the accused appellants in pursuance of the totally frivolous FIR tantamounts to sheer abuse of the process of law”, the Bench held.

Allowing the appeal, the Bench quashed all the proceedings sought to be taken against the appellants in pursuance of the charge sheet.